The debt deal arrived just in time, averting terrible disaster in the financial markets and global economy.

Well, the first phrase in that sentence is accurate. The rest? Not so much. After President Obama hailed the end of the Debt Drama Theater in Washington, stocks swooned, bonds rallied and the dollar weakened. The combination of movements indicated that confidence in the U.S. economic and government outlook is waning.

The stock market recorded its eight-straight decline as the Dow Jones Industrial Average skidded more than 265 points to close at 11866.62, its lowest level since mid-March. The Dow is still up 2% this year, but the S&P 500, the Dow Transports and Russell 2000 have all moved into the red for the year.

More troubling, the 10-year Treasury yield drifted down to 2.6%, a level usually associated with economic sluggishness — at best. In truth, that kind of yield portends something worse than sluggishness. Of course, the bond market could be wrong!

The market reaction to the debt deal prompts opposing questions. Perhaps the “cuts” in the debt deal aren’t so massive? Perhaps they are massive? Underscoring the pickle of the present moment, a deal that cuts too much too fast could smack the already weak economy in a bad way. A deal that forestalls making tough decisions could turn the national fisc into something truly scary.

Given that folks are a bit hazy on just which way the debt deal will go indicates that more problems are up ahead, no matter how soothing the President’s rhetoric from the Rose Garden.

On the economic front, July car sales showed a bit of life, but they remain at historically low levels. On Friday, the July employment report arrives. It isn’t expected to be very strong.

This morning, we’ll get a hint about the jobs news from ADP. The payroll company releases its monthly private-sector payroll forecast. It’s had a pretty lousy track record lately, but expect folks to still fixate on the number which arrives a little after 8 a.m. (A full analysis of today’s economic reports is lower down in this post.)

The earnings season, alas, has been largely overwhelmed by the dickering over debt in Washington. Reports continue apace today, with Comcast, Clorox, Time Warner and MasterCard among the leading lights reporting. (Full rundown of key earnings is down lower in this post.)

Looking overseas, the European debt situation has started to get a lot messier. Italy and Spain are slowly moving into the speculators’ crosshairs. The 10-year bond yield for both countries is now north of 6%, more than double similar yields for German bunds. Unlike Greece, Spain and Italy are not minnows. If they run into funding problems, that would raise existential questions about the euro-zone and the common currency itself.

With the U.S. (sort of) off the boiler, expect debt twitchers to start focusing more intently on Europe. Meantime, in the U.S., the road looks rockier up ahead.

Morning MarketBeat Daily Factoid: The Japanification of America seems to be a hot topic these days, replete with Godzilla references. In the 1956 film Godzilla: King of the Monsters, Raymond Burr took a star turn. He is better known, of course, as Perry Mason, among other roles.

L’Etoile du Nord

-Dave Kansas

MARKET SNAP:

At 5.45 a.m. EDT, S&P 500 futures are 0.5% higher at 1254.1. European bourses are lower, with the FTSE 100 falling 1.1%, the DAX 0.9% and the CAC 40 0.6%. In Asia, stocks closed in negative territory, with the Nikkei 225 falling 2.1% and the Hang Seng 1.9%.

Hertz swung to a second-quarter profit as worldwide car-rental and equipment revenue grew sharply. Shares jumped 2.8% to $13.35 in after-hours trading as results topped analysts’ expectations and the company raised its full-year outlook.

WebMD officials targeted on Tuesday improved growth for the health-website operator next year following a rough patch triggered by customer-related delays and cancellations. Shares rose 1.9% to $32.77 after-hours.

We get a big tease ahead of Friday’s July employment report when ADP releases its private-sector payroll forecast for July.

This number has had an erratic history of late. It badly overshot last month and historically is completely off the charts during the winter months. Still, despite this, erm, uneven track record, expect Wall Street to fixate on the report when it comes out at 8:15 a.m. EDT. Economists expects 105,000 jobs added in July. Expect them to be disappointed.

Ahead of the ADP reprot, the weekly MBA Mortgage Applications data is expected to (shocker!) show that the housing market remains moribund.

At 10 a.m., the ISM Non-Manufacturing data for July is expcted to come in nearly unchanged at 53.5, which would indicate that the services sector is still expanding, albeit not at a great pace.

Also at 10 a.m.: June Factory Orders. They are expected to show a decline of 0.1%, compared with a rise of 0.8% in May.

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